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Difficulty accessing capital is forcing nine in 10 (91%) of mid-sized businesses to curb growth plans, according to the latest research from BDO.
The bi-monthly survey of 500 leaders of medium-sized businesses, which looks at the challenges and opportunities facing UK companies, revealed that nearly one in four (24%) are being forced to scale back the business or make redundancies as a result of difficulty accessing capital.
Meanwhile, 22% are unable to finance plans for expansion, with a further fifth (20%) struggling to invest in new technology or software to improve their business for this reason.
An additional fifth say they are unable to raise salaries, while almost a quarter (24%) are also struggling to invest in initiatives or benefits to retain current employees.
Concerningly, this comes as 24% of businesses cite staff and skills shortages as one of their biggest challenges over the next six months.
Against this backdrop, businesses are turning to private capital markets for potential funding solutions. Private equity investment is the most attractive source of capital for almost a third (32%) of those in need of new funding, followed by equity capital markets (28%) and government support schemes (25%).
As a result of tough economic challenges, 40% will need to raise funds over the next year, while a further third (33%) plan to source new financing in the next 13 to 18 months.
Richard Austin, partner at BDO LLP, said: “Despite staying resilient through an incredibly difficult time, tough challenges remain for mid-sized businesses, with access to capital becoming a critical issue.
“As the engine of the UK economy, these companies are responsible for a large, vital proportion of its income and employment and their success will play a key role in the economic performance of the UK overall.”
He added: “Businesses believe more can be done to address their concerns, drive their growth and ensure the UK remains an attractive place to do business both today and in the future.”
